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Lawmakers face weighty decisions on state budget

(Messenger-Inquirer (Owensboro, KY) Via Acquire Media NewsEdge) Jan. 4--Twelve months ago, Kentucky lawmakers prepared to head to Frankfort with the challenge of crafting a two-year state budget following news that revenue streams were drying up while costs continued to rise.

The legislature closed out the 2008 session with a two-year $19 billion spending plan that used cuts to services and agencies but no new revenue measures to balance the budget.

Now a year later, members of the General Assembly are packing their bags for the trip to the state's capital with the same challenge ahead of them -- a balanced budget.

New revenue projections amid a continually sagging economy have the state facing a $456.1 million budget shortfall for the fiscal year that ends June 30 and promises that the budget will dominate discussions in Frankfort during this "short" legislative session.

"There are other issues out there, but they are dimmed in comparison by the need to deal with the economic situation of the state," said Rep. Brent Yonts, a Greenville Republican.

Budget Shortfall

Indications that the state might be facing a significant budget shortfall came last fall, and were confirmed by the findings of the Consensus Forecasting Group, a seven-member group of independent economists.

A forecasting group meeting in November set the anticipated shortfall at $456.1 million, which turned the focus for the 30-working-day 2009 legislative session to budget matters.

"I'm not sure that there's going to be much else other than the budget situation at the forefront," said Rep. Jim Gooch, a Providence Democrat. "There's not too many other things as critical as this situation."

In early January, Gov. Steve Beshear released his plan to close the state's budget gap this fiscal year that relies heavily on spending cuts, use of the state's budget reserves and an increase in tobacco taxes.

Beshear is proposing a 70-cent-per-pack increase in the state's cigarette tax that, at least initially, appears to be a tough sell with legislators.

The House this spring passed a 25-cent-per-pack increase in the cigarette tax after Beshear proposed a 70-cent increase, but local lawmakers said anything much larger than a quarter will be hard to vote for.

Rep. Jim Glenn, an Owensboro Democrat, said the state needs to guard against raising its tax rate much higher than the surrounding states, and he sees a 35-cent increase as about as high as the legislature could go.

Kentucky currently sees high rates of out-of-state cigarette purchases, and those would drop if the state boosts the tax rate to $1 per pack with the 70-cent increase, Glenn said.

"What's viable is somewhere between 25 and 35 cents," Glenn said.

Beshear has also proposed using as much as $17 million in coal severance funds that would go to coal-producing counties.

The state is seeing a boost in coal production, which means more coal severance dollars, and Beshear is proposing to use that unexpected increase to help shore up the state budget rather than passing it along to the counties.

"I'm pretty dang sure the House won't go along with that," Yonts said.

More revenue or more cuts

Most lawmakers are also calling for no more cuts to state agencies or services, which would see a total of $147.1 million trimmed under Beshear's plan.

Beshear has protected K-12 educational funding and Medicaid dollars from cuts, while calling for 2 percent cuts for higher education institutions and 4 percent cuts for most state agencies.

"Education is always a concern of ours, so we need to make sure we balance the budget in those areas," Glenn said.

In the absence of new revenue streams, or increasing revenues from tobacco taxes, cuts are the next option, said Rep. Tommy Thompson, a Philpot Democrat.

"His ability and our ability as the General Assembly (to balance the budget) is all predicated on the passage of that 70-cent cigarette tax," Thompson said. "Obviously there are going to have to be deeper cuts in other areas."

Sen. David Boswell, a Sorgho Democrat, said he has received calls from constituents concerned about other tax increases, including a rumor that ammunition will be taxed at higher rate.

But at this point, few proposals to address the shortfall have been offered apart from Beshear's plan, Boswell said.

That serious discussion might only begin once the state comes closer to shutting down services and agencies if a compromise can't be found.

"I think that's when the real discussion begins. That may be a hard core fact of life," Boswell said. "Everyone of us who represent our districts has a constituency that will be impacted negatively by whatever is cut and whatever taxes are raised."

Also on the plate

Though the session is likely to be dominated by the budget shortfall, it won't be the only issue brought up during the 30 working days before the session's April 15 close.

Boswell said he expects to see more work done to provide incentives for alternative energy production and continue the progress from 2007's special legislative session that saw the passage of a broad incentives bill.

"We'll be looking into maybe making some modifications to the energy bill to facilitate that," Boswell said.

Sen. Jerry Rhoads, a Madisonville Democrat, and Sen. Dorsey Ridley, a Henderson Democrat, have pre-filed a bill to create a statewide transportation infrastructure authority with the ability to borrow money and levy tolls to help pay for the state's largest transportation projects.

That could a funding mechanism to help pay for the extension of Interstate 69 across the state through Henderson, which is a top priority for many elected officials and business leaders in western Kentucky.

Thompson has pre-filed a bill to provide incentives to bring the film industry to Kentucky, a piece of legislation he offered during the 2008 session but that failed to move completely through the legislative process.

Thompson is not sure how his proposal will be received this year because of the economic downturn.

"Probably any bill that has to do with incentives or tax credits is going to be a little more difficult to pull because of the economy," Thompson said.

Glenn is also giving another unsuccessful proposal from the 2008 another shot -- his bill to make burgoo the state dish.

That designation could help promote Kentucky and economic development, Glenn said, particularly when so many visitors will be coming to Kentucky next year for the World Equestrian Games.

"When they come here, they will go to the restaurants and try it," Glenn said. "They'll be able to try something that they can't get in their own localities."

Leadership races

The first order of business when lawmakers get to work on Tuesday will be leadership elections in the House and Senate, and this year a local representative -- Thompson -- is making a run for House majority whip.

The whip is charged with helping gauge support for legislation and drumming up support when it's not there.

Most lawmakers remain mum about whom they are backing for leadership elections, which are conducted in private.

"I've just been really blessed and appreciative of the indications of support and encouragement I've received as I've campaigned for this position for about nine months now," Thompson said.

Thompson is "cautiously optimistic" about his chances in the race, which also includes Rep. John Will Stacy of West Liberty, Rep. Arnold Simpson of Covington, Rep. Ruth Ann Palumbo of Lexington and Rep. Rick Rand of Bedford.

This year also sees a race for house speaker between Rep. Jody Richards, the Bowling Green Democrat who has held the post longer than any other person, and Rep. Greg Stumbo, the Prestonsburg Democrat, former House majority floor leader and former state attorney general.

"I think the important thing is we're going to have some spirited elections Tuesday, and that's good," Thompson said.